AMERICAN CONSERVATISM IN 2008 AND BEYOND

@mysteryman,

Isn't that what I said? Jeeesh!

@mysteryman,

mysteryman wrote:

I'm not arguing that, I agree with you.
However, FDR and his economic policies prewar were actually not working like he thought they would.
It was the war that got us out of the depression, not any actions by the govt.

The War is just Stimulus spending. There is no difference between the two at all; it's outlays by the Federal Government straight to American businesses and individuals.

Cycloptichorn

2 Replies

@Cycloptichorn,

The war was stimulus spending on a massive scale.

In 1943, the government spent 3 times what it took in.

Not only that, the government was spending over 40% of GDP for 3 years straight. We currently are spending about 25% of GDP.

The deficit spending during the war was 30% of GDP. It is barely 10% today.

If the government was to pump another 15% GDP into the economy we would be seeing economic growth in the double digit range.

0 Replies

Exactly right, cyc. It was stimulus spending far above the level FDR could get thru the conservatives who opposed him, and it worked really well, tho of course that was not the main point of the spending. It is also worth noting that Sweden, which adopted Keynesian stimulus spending on a large scale early, was out of the Dapression by 1934.

Further, Horrors!, mysteryman, FDR's wartime spending was, in modern American conservative terms, SOCIALISTIC!!! Gags you to even think of it, doesn't it,mm? It was a command economy, products and prices dictated by the government, what companies could and could not make determined by government, and it worked beautifully, and it laid the groundwork for the huge increase in the American economy in the fifties and sixties. Maybe, just maybe, you guys ought rethink some of your conservative economic dogma. Join the 20th century, at least, if you can't get all the way up to the 21st.

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

mysteryman wrote:

I'm not arguing that, I agree with you.
However, FDR and his economic policies prewar were actually not working like he thought they would.
It was the war that got us out of the depression, not any actions by the govt.

The War is just Stimulus spending. There is no difference between the two at all; it's outlays by the Federal Government straight to American businesses and individuals.

Cycloptichorn

It fairly clear you took your cue from Paul Krugman's column in the NYT the other day. Unfortunately the analogy doesn't hold, and that "esteemed economist" should have known better when he wrote it. There were a few other features of the time that are not present now and make the analogy quite meaningless.;
1. The draft of millions into the armed forces.
2. Near universal price controls and rationing.
3. The mobilization of the whole country around a single purpose in the face of a perceived external threat.
4. The absence of any environmental restraints on the production of energy and manufactired goods.
5. The U.S. was then the only major economy in the world that escaped widespread and massive destruction in the war. We had no competitors, few imports, and huge demand for our products in other countries.

Finally, when the war ended we were spared the fiscal collapse that would otherwise been the result of the deficit spending, by the fact that there was huge pent up demand for our products both domestically and externally in a world in which nearly all the competing economies had been destroyed. Indeed that financial collapse did occur - in Britain, France, China, Japan, Germany, and Italy.

4 Replies

@georgeob1,

georgeob, Nobody argues the point that today's world is much different than it was back during WWII. Your list is somewhat a non-sequitur trying to include:

Quote:

1. The draft of millions into the armed forces.

That was a mandatory necessity. That would also apply today if our country should be attacked by another nation. I'm certain our government will reinstate the draft as soon as war is declared against another country.

Quote:

2. Near universal price controls and rationing.

That was the "fair" thing to do when most of our effort went into the war. What else could our government have done with limited food stuffs and energy?

Quote:

3. The mobilization of the whole country around a single purpose in the face of a perceived external threat.

You don't believe that will happen again if we are in similar circumstances as during that period?

Quote:

4. The absence of any environmental restraints on the production of energy and manufactured goods.

Any emergency as we had during WWII will temporarily expire any laws that limits our ability to fight any war of that scale.

Quote:

5. The U.S. was then the only major economy in the world that escaped widespread and massive destruction in the war. We had no competitors, few imports, and huge demand for our products in other countries.

True, but also true is that Japan and Germany overcame their destruction and became economic powerhouses. I believe we would have overcome any deficit from that war suffered by Japan and Germany, and regained our superpower status. Our production of consumer goods and services during and immediately after the war were few. What precipitated our growth was domestic demand followed by demand from overseas. Most countries were in no shape to be purchasing anything until they recovered from the war - like the rest of us.

1 Reply

@cicerone imposter,

You miss the point completely, Cicerone.

I'm not offering any criticism of the actions that were needed and taken in WWII.

Instead I am pointing out that they aren't happening now and that makes all the difference. The analogy that Cyclo (and Krugman) put forward is both deceptive and meaningless.

WWI wasn't merely "stimulus spending".

1 Reply

@georgeob1,

georgeob1 wrote:

There were a few other features of the time that are not present now and make the analogy quite meaningless.;
1. The draft of millions into the armed forces.

Which would be an example of a massive government jobs program. All those millions had jobs and were paid for their work.

Quote:

2. Near universal price controls and rationing.

Rationing would imply that consumers were prevented from buying and yet the economy grew rapidly. Why do you think that is george? Perhaps it was massive government spending.

Quote:

3. The mobilization of the whole country around a single purpose in the face of a perceived external threat.

Yes, and? The mobilization doesn't really say much about the economy other than it was focused and payed for by massive government spending.

Quote:

4. The absence of any environmental restraints on the production of energy and manufactired goods.

A non sequitor since there were a number of other things that didn't exist which would have increased productivity while reducing environmental impact. You wouldn't argue we would be a stronger economy if we went back to designing cars with pen and paper, would you?

Quote:

5. The U.S. was then the only major economy in the world that escaped widespread and massive destruction in the war. We had no competitors, few imports, and huge demand for our products in other countries.

The US was an economy built by the government to produce products. It was massive government spending that put the infrastructure in place.

Quote:

Finally, when the war ended we were spared the fiscal collapse that would otherwise been the result of the deficit spending, by the fact that there was huge pent up demand for our products both domestically and externally in a world in which nearly all the competing economies had been destroyed. Indeed that financial collapse did occur - in Britain, France, China, Japan, Germany, and Italy.

Yes, but we had infrastructure, factories, trained workers because of massive government spending.

1 Reply

@parados,

Clearly repeating the same mantra has immunized your mind from the contradictions that are so replete in your comments. Perhaps if you continue repeating it, some of it may magically become true.

The fact that the US alone had an infrastructure that wasn't destroyed in WWII and therefore had no competitors, no imports and huge foreign demand for anything we could produce .... and therefore uniquely was spared the financial collapse the hit everyone else after the war ... had nothing whatever to do with government spending.

1 Reply

@georgeob1,

Quote:

The fact that the US alone had an infrastructure that wasn't destroyed in WWII and therefore had no competitors, no imports and huge foreign demand for anything we could produce .... and therefore uniquely was spared the financial collapse the hit everyone else after the war ... had nothing whatever to do with government spending.

<sarcasm>Of course it didn't have anything to do with government spending. We didn't spend a thing to go to war and make sure Germany and Japan didn't make it to our shores. Everyone did it for free.</sarcasm>

0 Replies

@georgeob1,

georgeob1 wrote:

Cycloptichorn wrote:
The War is just Stimulus spending. There is no difference between the two at all; it's outlays by the Federal Government straight to American businesses and individuals.

It fairly clear you took your cue from Paul Krugman's column in the NYT the other day. Unfortunately the analogy doesn't hold, and that "esteemed economist" should have known better when he wrote it.

What Cycloptichorn says here isn't just Paul Krugman's opinion. The textbooks of Ben Bernanke and Greg Mankiw say exactly the same thing about World War II. Bernanke and Mankiw are both Republicans, and both headed the Council of Economic Advisors under the second president Bush. Granted, this doesn't guarantee they all have it right; but it does prove you can't simply dismiss it as one professor's liberal pipe dream.

But I shouldn't be surprised that you'd do it anyway. With hindsight, indeed, it seems quite predictable that you would indulge your personal animosity against Paul Krugman rather than face an economic reality that's uncomfortable to your politics. I have learned through experience that detailed arguments won't change your mind, so I'll resist the temptation to go through your bullet points.

1 Reply

@georgeob1,

Thomas answered your post quite well, but I would point out that I didn't read that Krugman article in the NYT the other day; but instead, happen to actually know a few things about economics, and what is stimulus spending and what isn't.

If you want to forward an argument that our modern day isn't the same as back then, great; I'm all for having that discussion. But it in no way disproves my point that the spending in WW2 which helped bring us out of the depression was, by definition, stimulative spending on the part of the government.

Our depression most certainly wasn't ended by tax cuts for big business or the rich, or less regulation of industry, or whatever twaddle passes for economic advice on the Republican side of things these days...

Cycloptichorn

1 Reply

@georgeob1,

I don't believe so; I think they are on target about how to revive our economy. If you've been reading my posts, that's exactly what I've been suggesting; only that Obama's way have wasted money in many ways that did not stimulate our economy.

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@Thomas,

I'm dissappointed in you for that. I made a serious and concrete argument that raises real questions about the merit of the WWII economic analogy. You merely hide behind an assertion that I am impervious to argument.

There is little doubt that the massive public mobilization and spending of WWII ended the depression and its second dip which occurred in 1937. However, there is are serious questions about the merits of any analogy with our present situation.

All of the nations involved in WWII, winners and losers, suffered massive exonomic and financial collapses after WWII, except the United States and Canada . We fortunately emerged from the war physically intact, and internationally as creditor nations, despite a huge domestic public debts. We faced no international economic competition, required few imports and were (uniquely) able to reinstitute postwar economic growth under these conditions. Other nations, without these benefits, were not. Our situation today is not at all like that of 1945 in these respects.

That fact alone gives the lie to the notion that the massive spending of the war was the only or best solution to the world wide depression or that, as a solution, it didn't involve any disastrous aftereffects. The massive spending during the war itself directly led Britain to a very serious post war collapse - indeed rationing continued for several years after 1945. Despite huge extractions of money from colonies and dependent states, and notwithstanding the fact that it didn't suffer the massive destructiuon of Germany, Britain suffered two decades of economic contraction after the war as it dealt with the collapse of empire and the rebuilding of its economy.

All of this strongly suggests other factors were involved, and that the prsumed lesson that massive government spending is an unfailing path to economic recovery is itself false.

3 Replies

@Cycloptichorn,

The money owed to the United States by Britain and France in both World Wars did help buoy the US economy. which in turn helped the world economy as the Marshal Plan kicked in as Germany went on a reconstruction which resulted in new factories and made it the envy of the world.

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@georgeob1,

Quote:

There is little doubt that the massive public mobilization and spending of WWII ended the depression and its second dip which occurred in 1937. However, there is are serious questions about the merits of any analogy with our present situation.

Of course you ignore the cause of the second dip. FDR cut back on stimulus spending because he was being attacked over the deficits. The result of the drop in stimulus spending was another dip in the economy.

1 Reply

@georgeob1,

georgeob, Many of our allies used US produced war machines; we had the raw materials, the factories, and the manpower to produce them without the interference of war ravages at home. Most of WWII remained in Europe and the Far East. Except for Pearl, most of the Pacific war was fought on the islands in the Pacific and SE Asia.

Our defensive system was pretty good after Pearl, and the likelihood of another attack was minimized by the very fact that we took the war closer to their homeland, and our defense was better established on the West Coast. I understand there were some skirmishes around the islands of Alaska, but not major battles.

0 Replies

@georgeob1,

georgeob1 wrote:

All of the nations involved in WWII, winners and losers, suffered massive exonomic and financial collapses after WWII, except the United States and Canada . We fortunately emerged from the war physically intact, and internationally as creditor nations, despite a huge domestic public debts.

True enough so far.

georgeob1 wrote:

We faced no international economic competition, required few imports and were (uniquely) able to reinstitute postwar economic growth under these conditions.

If that was a decisive factor of the post-World-War-II story, the receiving side of America's trade surplus should have fallen back into recession. But it didn't. Japan and Germany, in particular, boomed after World War II. In the mid-1950s, their GDPs surpassed the trend line of pre-war growth. If America's intact infrastructure and competitor-free export is so crucial to the postwar story, how do you explain the booms in devastated continental Europe, and in Japan?

(Britain is a special case. It had other problems, including the collapse of its empire that you mentioned, and uniquely inept socialist policies under Clement Atlee. It isn't really a solid story to hang your case on.)

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@parados,

It's actually quite amazing how GDP follows the government deficit spending during those years

Code:

 	    1936     1937     1938     1939      1940     1941      1942   

GDP % grth  13.0      5.1  	-3.4	 8.1	  8.8	  17.1	    18.5

Deficit spending in millions

Code:

1935        1936        1937          1938        1939           1940          1941        1942

-2,803    -4,304         -2,193        -89        -2,846        -2,920      -4,941     -20,503

Would you look at that. In 1937 they reduced the stimulus and in 1938 it was nonexistent and the economy dipped. It seems that the numbers show the opposite of what you claimed.

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How can people save for their retirement when the wages of the bottom four quintiles (for the mathematically impaired, that is 80%) of the working population have been stagnant since 1979?

That was one year after the last year that a head of household could work as a retail clerk (not manager) and make enough money to support a family.

The top quintile's wages have, overall, tripled while the salaries of the top 1% went through the roof.

There is the problem: that unproductive top 1%.

1 Reply

AMERICAN CONSERVATISM IN 2008 AND BEYOND

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